It's Medicare, Not Social Security, Stupid

Bruce Bartlett writes:

The Financial Report of the U.S. Government for fiscal 2004, released just before Christmas, says the unfunded liability of the Social Security system is $12.5 trillion, an increase of $810 billion over the previous year. However, the Medicare deficit is twice that: $24.6 trillion, a rise of $9.6 trillion from 2003.

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...we can formulate policies to deal with Social Security's long-term problems relatively easily. But we haven't even begun to think seriously about how to ration medical care, which must happen at some point. For example, we could change Social Security's indexing formula and eliminate almost all its long-term deficit. This would not cut one person's benefits, current or future, below today's. All it would do is eliminate future real benefit increases over and above inflation.

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Estimates show just keeping real benefits unchanged — still indexed for inflation — would allow perpetual payment of Social Security benefits with no increase in tax rates. Future retirees will get exactly what current retirees get in inflation-adjusted terms. They just won't get more, as they will under current law.

If I were a Democrat, I would support this reform and thus get the issue of Social Security's solvency off the table. This would force Republicans to justify private accounts on their own terms, rather than as a cure for Social Security's long-term deficit. If Republicans don't go along, it would prove they aren't interested in saving Social Security but have another agenda.

With Social Security secure in its present form, Democrats could then turn their attention to Medicare, which only they can fix. Republicans won't make any effort to reduce Medicare growth for fear it would be too easily demagogued as a benefit cut. Therefore, Democrats must take the initiative to get control of Medicare and put it on a sound long-term footing.

The Financial Report's introduction by David Walker, comptroller general of the United States, makes clear our long-term budget trends are unsustainable and, if not addressed, will cripple the economy, threaten national security and reduce the quality of life for all Americans. The political party that steps up to this challenge will be the one that deserves to govern.